Court refuses request to freeze Kazaa assets

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A court in Sydney has refused to grant an Australian recording
industry request to force owners of the file-swapping giant Kazaa
to disclose their assets pending a decision in a landmark music
piracy case.

A group of Australian record labels are suing Kazaa's owners for
widespread copyright infringements by the global file-sharing
network's estimated 100 million members.

Record industry lawyers claim Kazaa users download up to 3
billion files each month, freely exchanging songs, music and
television programs without paying royalties to the copyright
owners.

The record companies want Kazaa's owners declared liable for
copyright breach and loss of earnings in the civil case. If they
are successful, a trial to set damages will likely proceed later
this year.

Record industry lawyer Tony Bannon on Friday asked the Federal
Court of Australia to grant an order forcing Kazaa's owners to
disclose their assets, and restraining them from selling or
transferring those assets to parties in or outside Australia.

Bannon said he filed the claim after learning late last month
that Kevin Bermeister, the chief executive of Altnet, one of the
companies the record industry claims is behind Kazaa, sold half of
his multimillion dollar harborside Sydney mansion to his wife,
Beverley Bermeister, in September last year.

Bermeister and his wife continue to live together in the house,
Bannon alleged.

The reported sale of Kazaa chief executive Nikki Hemming's
luxurious mansion to the company's accountant, John Meyers, last
month was also of concern to the record industry, Bannon said.

The assets of Kazaa's directors "appear to be disappearing out
of the control of the respondents," he told the court.

Mary Still, a lawyer representing Sharman Networks Ltd., which
owns Kazaa, said the company and its directors have agreed not to
dispose of their assets - except for daily expenditures -
until a decision was reached in the liability portion of the
trial.

However, she said the company and its directors were under "no
legal obligation" to disclose their assets to the court.

"That only comes about once they (the record companies) have won
these proceedings," Still said in a telephone interview after the
hearing. But, she added: "The record industry has never won this
argument anywhere in the world."

Members of the entertainment industry have already sued
file-sharing services in the United States. Two federal courts in
California have cleared Grokster and StreamCast Networks of
liability, but the industry has appealed to the US Supreme
Court.

Sharman is named in a similar suit pending in a lower court.

Analysts say the US cases is unlikely to affect the Sydney
trial, but all the cases share the principle that a software
developer is not directly responsible for its users'
activities - just as Xerox cannot be blamed for copying done
on its machines.

Kazaa already has one major court victory under its belt, with
the Dutch Supreme Court ruling in December 2003 that the network's
Netherlands division cannot be held liable for copyright
infringement.